The competition between Cisco and Arris for video infrastructure leadership will remain close after the current acquisition deals is complete, said Synergy Research Group.
“While in some senses Cisco and Arris will remain direct competitors, it is clear that their strategies are fundamentally different and they are headed in distinctly divergent directions,” said John Dinsdale, chief analyst and research director at Synergy Research Group.
Cisco is doubling down on all things cloud, network and software, and being a major player in a high-volume CPE business does not sit well with that strategy. Arris has clearly decided that its future lies in carving out a large share of the global video client device market.
Technicolor completed the acquisition of video CPE business from Cisco in November. The Arris acquisition of Pace is virtually guaranteed to proceed.
In the third quarter of 2015 Arris and Pace in aggregate generated video hardware revenues that were 5 percent short of Cisco’s total video hardware revenues.
Had Cisco’s CPE business already been divested, then Arris / Pace would have been 17 percent ahead, though Cisco would still be the second-ranked video hardware vendor thanks to its dominance of the network hardware segments.
Technicolor’s share of hardware revenues would jump to almost 8 percent if it included the acquired Cisco assets. On the software side of the market Cisco’s share is over 20 percent and far ahead of its nearest rivals – Nagra and Arris.
The report noted that the current M&A deals are being driven by changes in the client hardware (or CPE) market. Revenue growth has mostly gone from this mature market and success is predicated on the ability to generate margins from high-volume global operations. The network and software sides of the market continue to grow steadily but require a different business focus.
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